EUR

EUR PAYBACK PART 2: USD stabilizes after US jobs growth outpaced expectations in October along with +110K in upward revisions for September and August. Non-farm payrolls, rose 151K in Oct from a revised -41K (prev -95K) in September and a revised -1K (prev -57K) in August. Unemployment remained at 9.6% for the 3rd consecutive month. HOW COULD EURUSD rise 3.5% during the same 2 weeks when Irish/Greek/Spanish 10 year spreads rose 20-25% relative to Germany? Anticipation of Feds QE2 has been the main catalyst. But the euro can no longer sustain those highs solely on the back of the Fed asset purchases, while shrugging the ensuing widening in corporate spreads. Irelands ambitious new budget (yet to be approved in parliament) aims at cutting the deficit to 9.25%-9.5% of GDP in 2011 from the current 11.9%. EURO SHORTS WILL NEED need to see a weekly close below $1.40 for hopes of prolonged declines, but only a close (later next week) below the 200-week MA of $1.3938 would sharpen selling. A close above $1.40 this week, could qualify EURUSD for renewed gains towards $1.4320 & $1.4450 resistance. EURCAD DROPS below $1.41, testing its 55-week MA for the first time this year. The cross-over in weekly stochastics aiming at 1.4040-50 support, which would be followed by 1.38.

Ashraf